ICTA88/S804C and ICTA88/S804E (inserted by FA00/SCH30/PARA18) set out explicit rules for setting expenses and other deductions against items of income to calculate the measure of income, and therefore of corporation tax in respect of it, against which the creditability of foreign tax is to measured. They do not apply to tax on overseas branch profits.
ICTA88/S804C applies to all categories of insurance business,
including general business. Where a company has both general
business and long-term business which is not life assurance
business, such as permanent health insurance (PHI), the businesses
are a single category for this purpose. ICTA88/S804C is limited to
cases where a computation in accordance with the provisions of Case
I of Schedule D falls to be made. Thus it does not apply to a
general insurer carrying on business on a mutual basis.
The section applies where the company has any item of income
or gain where credit for foreign tax falls to be allowed. It
applies on an item by item basis, but there may be scope for
shortcuts in calculating the restriction by looking at the total
foreign income with creditable tax referable to a category - see
GIM12250. It does not apply where the
company does not claim, or disclaims, credit, and expenses the
foreign tax under ICTA88/S811.
